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Credit investors flee to safety, pulling $11bn from junk bonds this year

AI disruption and war in the Middle East send market towards Treasuries and investment-grade debt

Credit investors have piled into defensive positions by shifting out of riskier areas of the debt markets over the past month, as worries over AI disruption and the war in the Middle East persist.

Investors pulled an average of $2bn a week from US junk bond funds over the past month, a more than 20-fold increase from the four weeks prior, according to data compiled by JPMorgan. The asset class lost nearly $11bn this year.

Leveraged loans, which are exposed to the beleaguered software sector, saw $887mn of weekly average outflows during the same period, compared to inflows of $247mn in the prior month, JPMorgan data shows.

“We’re being a little bit more cautious and risk-off in the current environment,” said Ali Hassan, portfolio manager at Thornburg Investment Management, which is reducing holdings of high-yield debt while buying more Treasuries and investment-grade debt. 

The flight to safety has contributed to more than $5.2bn of average weekly inflows for high-grade bonds during the period, according to JPMorgan.

Rising Treasury yields and widening credit spreads — the premium borrowers pay over US Treasuries — pushed total yields on investment-grade corporate bonds to 5.15 per cent by the end of March. That was up from 4.7 per cent from a month ago, according to Ice BofA data.

“The high-quality part of the corporate bond market has been very resilient despite all the volatility in other corners of the market,” said Matt Walker, senior portfolio manager at Income Research + Management. “People find the total returns very attractive.”

Some investors have also allocated more capital to cash and short-term securities to build up buffers. 

“It’s always good to add to the cash-allocation cushion in times of financial markets uncertainty,” said Sanjay Chawla, chief investment officer of insurance group FM.

“Given that we’re not in the zero per cent or low-rates environment, you’re better off having a higher cash allocation for a little bit longer until you have better visibility.”

The risk-off sentiment has put new deals in the junk-grade market under pressure. Customer service software group Qualtrics halted more than $5bn of debt sales in March as AI fears damped investor appetite.

This week, packaging company Sealed Air offered sweetened terms and pricing to get its $7.2bn debt offering across the finish line, partly due to concerns about rising business costs amid elevated oil prices.

Hamza Lemssouguer, founder of credit investment firm Arini Capital, said a number of fund managers had been sitting out new deals, complicating bankers’ efforts to finance leveraged buyouts.

Lemssouguer noted the advance of AI had cooled enthusiasm for new software debt and that the war in the Middle East would pressure margins for businesses that consume commodities in the chemicals and packaging space.

Despite the current volatility and heightened uncertainty, high-yield bonds are down just 0.6 per cent this year, according to the Ice BofA index. A subset of riskier debt rated single-B, a rating often targeted by private equity shops as they structure new buyouts, is off 0.4 per cent.

“I would not take comfort just because the market is not reflecting the pain,” Lemssouguer added. “Once liquidity is exhausted, prices will begin to drop.” 

Investors also are worried about the weakening US labour market and cracks in private lending.

“These issues have been somewhat covered up behind the fog of this war,” said George Catrambone, head of fixed income Americas at DWS Group, which favours sectors including energy and utilities. 

In a sign of investors demanding greater compensation for the risk of default on lower-quality debt, the average spread for US high-yield bonds grew to 3.46 percentage points on Monday, its widest level since May 2025. Total yield stood at more than 7.4 per cent at the end of March, Ice BofA data shows.

Still, some investors are unswayed, arguing the current yield on junk bonds is insufficient given ongoing risks, such as potential war-induced inflation, that could reverse the rate-cutting trajectory. If interest rates increase, debt issued at lower rates becomes less attractive.

“There’s a lot of uncertainty building out there that we don’t think we’re being compensated for,” said Dan Carter, senior portfolio manager at Fort Washington Investment Advisors. “We’ve moved up in quality in our portfolios.”

Carter said he had reduced high-yield bond holdings and added high-grade bonds, such as those issued by major US banks, particularly subordinated notes from highly rated companies that offer extra yields. 

“We like boring names in times of volatility,” Carter said.

Europe must prepare for ‘long-lasting’ energy shock, EU warns

Energy commissioner says bloc is assessing ‘all possibilities’ including fuel rationing and releasing more oil from strategic reserves

The EU is assessing “all possibilities” including fuel rationing and releasing more oil from emergency reserves as it braces for a “long-lasting” energy shock from the Middle East war, the bloc’s energy commissioner has said.

“This will be a long crisis . . . energy prices will be higher for a very long time,” Dan Jørgensen told the FT, warning that for some more “critical” products “we expect it to be even worse in the weeks to come”.

The near closure of the crucial Strait of Hormuz waterway and strikes on energy infrastructure in the Gulf have created chaos in global energy markets, sending prices soaring and prompting long-term supply fears. Airlines have raised particular concerns about jet fuel supplies.

“The rhetoric that we’re using and the words we’re using are more serious now than they were earlier in the crisis,” Jørgensen said. “It certainly is our analysis that this will be a prolonged situation and countries need to be sure that they . . . have what they need.”

He said that while the EU was “not in a security of supply crisis, yet”, Brussels was drawing up plans to tackle “structural, long-lasting effects” of the conflict.

This included “preparing for the worst scenarios” even if the bloc was “not there yet” on needing to impose rationing of critical products such as jet fuel or diesel. “I mean, better to be prepared than to be sorry,” Jørgensen said.

Asked about the possibility of weakening jet fuel regulations to permit more US imports, or allowing more ethanol blending for automotive fuel, Jørgensen said “we’re not there yet where we have remedied or changed any of our current rules”.

But he added: “We are looking at all possibilities and it’s clear the more serious the situation gets, the more of course we will also have to look into legislative tools.”

The EU and US have differing standards for jet fuel. Jet fuel in the EU has a freezing point of -47C, while in the US it is -40C. 

Jørgensen also said he “will not exclude” another release of strategic energy reserves “if the situation becomes more dire.” EU countries took part in the largest release of strategic oil reserves in history last month, in an attempt to tame soaring prices.

Jørgensen would not share the EU’s “exact analysis” on when a new release might be required but said “we are taking it very seriously and we are ready to do it when and if it becomes necessary”.

“We need to keep our possibilities open, and if this is indeed, as I project, a long-lasting crisis, then we need those tools also at a later stage,” he added. “It needs to be done at the exact right time, and it needs to be proportionate.”

Jørgensen also reiterated his position that there would be no change to EU legislation to end Russian liquefied natural gas imports this year. He said that relying instead on the US and other partners to provide additional supplies was acceptable as they operate in “the free market”.

Saudi TV drama about Iran hostages revived as war sours relations

Series based on 1987 crisis was filmed four years ago, then shelved as Riyadh and Tehran improved ties. Now viewers may finally see it

A long-delayed Saudi TV series about diplomats from the country who were held hostage in Tehran is being revived as ties between the two countries break down in the face of the US-Israeli war on Iran.

The series Embassy 87 is inspired by real events that followed the deaths of hundreds of people in clashes between Iranian pilgrims and Saudi police during the Hajj pilgrimage in 1987.

In response, Iranian protesters attacked the Saudi embassy in Tehran and several diplomats were held for 24 hours by the Islamic Revolutionary Guard Corps.

The series was originally shot more than four years ago, before Saudi Arabia and Iran signed a Chinese-brokered agreement in March 2023 to resume diplomatic relations, said three people familiar with the situation. One said it was shelved in light of the détente.

But as Iran responded to the US-Israeli attack last month by launching missiles and drones into the Gulf, Saudi broadcaster MBC Group released a trailer on March 3 announcing the series would soon come to its streaming platform Shahid, which competes with Netflix and Disney in the Middle East.

“Not all wars are fought on the battlefield” is the tagline with the trailer showing panicked Saudi embassy staff rushing to the basement as protesters climb metal gates to break into the building.

The show is directed by Colin Teague, a UK filmmaker who has previously worked on Dr Who.

It is unclear whether a final decision has been made to air Embassy 87. MBC initially announced that the first episode of the series would be released Friday, but a label on the show’s listing now only says “soon”.

Saudi Arabia has publicly opposed the war, with the kingdom’s de facto ruler Crown Prince Mohammed bin Salman telling Iran’s president he would not allow the use of Saudi territory or airspace to attack the Islamic republic. But the kingdom has still been targeted by Iranian missiles and drones that have hit a US base and refineries inside the territory.

Sunni-led Saudi Arabia and Shia-led Iran have long been arch-rivals competing for power and influence in the Middle East. While relations improved after the Beijing accord, Saudi anger has mounted in recent weeks after Iranian attacks on the kingdom.

“What little trust there was before has completely been shattered,” Saudi foreign minister Prince Faisal bin Farhan said last month.

Reda al-Nuzha, former Saudi consul general in Tehran, confirmed on social media site X that Embassy 87 is based on events in which he played a central role.

“With all humility, I say that I am that consul who was subjected to torture, kidnapping, arrest and imprisonment when I was Saudi Arabia’s consul in Iran in 1987,” he posted on X on Monday.

Founded in London in 1991 as the Arab world’s first private satellite channel, MBC was brought under government control in 2017 after its founder was among hundreds of royals, businessmen and former officials detained at the Ritz-Carlton hotel in Riyadh as part of an anti-corruption crackdown.

The Public Investment Fund, the kingdom’s nearly $1tn sovereign wealth fund, took over the government’s stake in MBC last year in a private transaction worth around $2bn.

Despite strong ties to the government, MBC has sparked controversy over the years with content tackling topics including homosexuality, religion and contentious Arab history. A multimillion-dollar production portraying the life of an early Islamic ruler was last year banned by Iraq and Iran, with some clerics denouncing it as sinful.

Mazen Hayek, a former MBC executive, said that the ongoing war makes Embassy 87 “very compelling and relevant” as Gulf audiences follow a war in which their countries are squeezed between the US and Israel on one side and Iran on the other.

“MBC is also caught in the middle. On one hand, pushing the envelope creatively is about survival in the face of competition from the likes of Netflix and Disney,” said Hayek, who now works as a Dubai-based media consultant. “On the other hand, you have other social and geopolitical considerations to take care of.”

MBC did not immediately respond to a request for comment.

In 2023, the group removed a series about the 1988 hijacking of a Kuwait Airways flight by Lebanese guerrillas from its streaming service after protests from the Kuwaiti government.

The first quarter of 2026 proved challenging for many prominent hedge funds including Balyasny Asset Management and ExodusPoint, as geopolitical tensions and market volatility weighed on performance, according to a report by Business Insider.

Dmitry Balyasny’s $33bn firm fell 4.3% in March, leaving it down 3.8% year-to-date, while Michael Gelband’s ExodusPoint, which focuses more on fixed-income strategies, declined 4.5% in March. London-based LMR Partners’ multi-strategy fund meanwhile, lost 2.4%.

Asia-based multi-strategy managers Dymon Asia and Pinpoint Asset Management fell 4.3% and 2.5% respectively for the month but remain positive for the year.

Some managers though mitigated losses: New York-based Schonfeld Strategic Advisors was flat in March and up 0.9% year-to-date.

Market headwinds included the ongoing Middle East tensions, which drove energy prices higher, and macro trades that backfired, such as bets on falling short-term interest rates in the UK and Europe. Earlier in Q1, software stocks sold off amid investor unease over AI developments from start-ups like Anthropic.

The S&P 500 posted its worst quarter since 2022, down 4.6%, reflecting a volatile environment that tested both macro and multi-strategy funds.

Dmitry Balyasny’s $33bn firm fell 4.3% in March, leaving it down 3.8% year-to-date, while Michael Gelband’s ExodusPoint, which focuses more on fixed-income strategies, declined 4.5% in March. London-based LMR Partners’ multi-strategy fund meanwhile, lost 2.4%.

Asia-based multi-strategy managers Dymon Asia and Pinpoint Asset Management fell 4.3% and 2.5% respectively for the month but remain positive for the year.

Some managers though mitigated losses: New York-based Schonfeld Strategic Advisors was flat in March and up 0.9% year-to-date.

Market headwinds included the ongoing Middle East tensions, which drove energy prices higher, and macro trades that backfired, such as bets on falling short-term interest rates in the UK and Europe. Earlier in Q1, software stocks sold off amid investor unease over AI developments from start-ups like Anthropic.

The S&P 500 posted its worst quarter since 2022, down 4.6%, reflecting a volatile environment that tested both macro and multi-strategy funds.

Publicis Groupe is set to acquire 160over90 in a bid to win more of advertisers’ spending in sports

Publicis Groupe is acquiring sports-marketing agency 160over90 from WME Group for more than $500 million.

The acquisition capitalizes on sports becoming an essential channel for brands seeking mass reach amid splintering consumer interests.

A new partnership between WME Group and Publicis Groupe will give the advertising giant access to WME’s talent roster.

Publicis Groupe is acquiring the sports-marketing agency 160over90 from talent firm WME Group as sports becomes an increasingly essential channel for brands seeking mass reach.

The French advertising group will pay more than $500 million for the company, according to people familiar with the transaction, and absorb its 670 employees into a unit called Publicis Sports. WME, which was known as Endeavor until going private last year, bought 160over90 in 2018 for approximately $200 million.

The agency is best known for brokering and managing brands’ sponsorship deals with athletes and sports properties. It also runs corporate hospitality and branded experiences at events like the Super Bowl and the Olympics.

Sports has emerged as one of the few pillars of monoculture still standing while consumers’ interests, tastes and time splinter across an array of media channels. The rise of women’s sports has at the same time opened up more sponsorship opportunities to female-focused brands.

Ad holding companies have tried to capitalize by forming new teams to help clients navigate the world of media rights, exclusivity deals, athlete contracts and more. Stagwell in January announced it had spun off its Sport Beach events business into its own company, while the media-buying arm of London-based WPP announced the formation of WPP Media Sports, “a unified, data-driven sports marketing practice.”

Publicis, which owns agencies such as Saatchi & Saatchi and BBH, similarly said it would bring more transparency to the disjointed business of sports marketing, a channel that clients have long complained lacks good data to reliably prove a return on investment. It will pitch advertisers on an all-in-one solution: Publicis will broker sports sponsorship deals, but also make the ads, buy the media and work with influencers to amplify them, and boot up its Epsilon data business to measure and adjust for reach and effectiveness, executives said.

“Everything in sports is completely disruptive, the growth has been crazy, but yet it’s fragmented, and the model hasn’t changed in 25 to 30 years,” said Suzy Deering, a former chief marketing officer of Ford and eBay who was named chief executive of Publicis Sports last October. “We’re bringing it all together so that we now have one comprehensive strategy.”

The arrangement will give the advertising giant access to WME’s talent and intellectual property roster, and WME access to some of the world’s largest brands, at a time when celebrities are growing more and more reliant on brand deals to shore up their wealth and fame. WME represents stars including figure skating gold medalist Alysa Liu, tennis champion Carlos Alcaraz, and actors Teyana Taylor and Michael. B. Jordan. Publicis clients include top ad spenders like McDonald’s and Coca-Cola.